What is Segmentation and Targeting?
Question:
Discuss about the Clients and Marketing.
In order to effectively market their services and get a better understanding of the market composition, organizations need to segment their market. Segmentation is the process of division of broad market into smaller subdivisions on the basis of one or more common characteristic that they share. This involves creating small groups within the market that brings together the customers that show inclination towards similar products or services. This way, the customers get the products and services matching their needs and the organization is able to utilize the available resources in a better way. Once the segmentation process is completed, specific segments are targeted with specially designed marketing schemes and promotional techniques. This process is known as targeting. Targeting is the next step following segmentation of markets. It is done so that the organizations can take advantage of the common dimensions of homogenous market segments. In this process, the organizations decide on the customer segments that they are going to focus their marketing efforts on. Both marketing and segmentation are equally important to ensure overall success of any organization (Kotler & Bowen, 2015).
There are two basic segments into which we can classify the customers of any product or service. They are either consumer also known as the end users or the organizations that buy the products or services for the purpose of reselling or for using them for supporting the business operations. These segments are popularly called the B2C or business-to-customer segment and the B2B or business-to-business segment. There is a huge difference between the segmentation and targeting strategies for both these. The B2C selling is faster, less time consuming and less complicated. It involves longer distribution channels and the marketing strategies are made to connect with the customers directly through advertisements, social media etc. A business with a B2B segment is generally more complicated, time consuming and targeted through personal relationships and consultative selling. Since the value of individual transactions is high in B2B selling, it is considered high value and high risk, whereas the B2C selling is more frequent and there is less risk involved per transaction (Walletzky, 2015). However the lifetime of a B2C customer is lower when compared to a B2B customer as there is a low cost of sale and repeat sales. Thus a B2B customer has a higher chance of having greater lifetime customer value.
The Darwin Symphony Orchestra (DSO) is a 27 year old not-for –profit organization. It comprises of a central professional group and about 65 volunteer musicians that keep not just the Darwin community, but also the audiences from every corner of their territory entertained. They carry out concerts, individual performances, music tours, indoor symphonies, outdoor family entertainment etc. They regularly perform with guest artists who range from opera superstars to leading Australian musicians. They thrive on the values of accessibility, vibrancy and community volunteering and are the primary providers of symphonic music in Northern Australia. They have started with a teaching initiative named DSO Music Education in Schools by the DSO String Quartet and run a Family Prom Series for music education that is family-based. Thus we can observe that anyone even remotely interested in music in any form can be a potential customer for Darwin Symphony Orchestra. They serve both individuals that are B2C customers and the organizational B2B customers (Wood, 2013). Some of the B2C customers for DSO can be the seekers of family performances, musical concerts, regional tours and a few examples of B2B customers can be the organizers of music performances in outdoor programs, schools, institutions etc.
B2C and B2B Segments
Although the Darwin Symphony Orchestra is a not-for-profit organization, it requires funds for the running of the practice sessions and performances. These funds are raised by organizing fundraising events and by giving performances. Thus, they need to have customers for the services of musical performances or lessons that they offer. They also need to market the service being offered in order to attract more and more customers. The entire customer base of DSO can be segmented for devising an even better and more refined marketing plan that has higher chances of success. The people involved in the segmentation process must make sure that the segments that are made, possess a common characteristic and must be a predictor of the differences in the behavior of the buyers. The purpose of segmentation must also be clear in the minds of the strategists. The segments made must be clearly identifiable, reachable through distribution channels and communication channels, substantially larger in size and having unique needs to justify the different marketing mix designed for them. Once the segmentation process is done carefully, it becomes easier for the organization to allocate the resources and develop separate marketing strategies for each of the segments that is to be targeted. For DSO, segmentation will result in effective promotional and marketing efforts and thus more success in the coming years. The three broad and most commonly practiced ways of classifying and segmenting the customers are behavioral variables, psychographic variables and profile variables (Larsen, 2010).
The Behavioral variables can include benefits that a customer seeks from the service, frequency of purchase, the type of customer, occasion for purchase, purchase behavior, loyalty for the orchestra, the period for which the service is required and the perception of the consumers (Rani, 2014). On the basis of behavioral variables, the DSO can have segments of customers who are regular customers, one-time customers, corporate customers etc.
Psychographic variables are used to correlate the lifestyle, value system or personality of the customer with the purchase behavior. These may include customer interests, opinions, attitudes, activities etc. Customers having varied personality respond in a different manner to the marketing attempts. This is the main purpose of the study of psychographic segments of the customer base (Lynn, 2011). The psychographic segments of customers of DSO can be made on the basis of their interest in music, the genre of music they listen to, their personalities etc.
The third basis for segmentation of customers is profiling. This makes the segments of the customers based on the demographic factors like the age group they belong to, gender, lifestyle, income bracket, the socio economic group, geographic location they belong to in Australia etc. However, there are a few drawbacks of profile based segmentation. In practice, profiling of the customers is mostly done before segmentation process and most of the times the people belonging to same profile segment show varied interests and preferences (NRCDR, 2015).Thus, profiling is not a very accurate method of market segmentation. Profiling of the customers of DSO can be done based on their age, profession, geographic area etc.
Importance of Segmentation and Targeting for Darwin Symphony Orchestra
Segmentation of a B2B market is very different from segmentation of a consumer market. Although some variables for segmenting the market remain the same for both, a very common basis of classifying the B2B customers is the macro segmentation and micro segmentation. The B2B segmentation of customers is done by classifying the entire B2B market into macro and micro segments (FTMS, 2012). Macro segmentation is when the market is divided on organizational criteria or on the basis of variables having a broader scope, like the size of the organization, industry that it is a part of, location of the organization etc. and micro segmentation makes use of variables that are mostly customer oriented like customer choice, type of customer, decision making process, decision making unit etc. For DSO, of all the customers, we can have the macro segments of customers on the basis of organization size, geographic location, customer’s business potential and standard industry classification like educational institutions, hospitality, entertainment etc. Micro segmentation for DSO will be more detailed and require a higher degree of knowledge regarding the B2B customer base (Wind & Bell, 2007). It can be employed on the basis of the decision making structure of the organization, perceived significance of the service, attitude towards the vendor, method of purchase, the urgency of the service required etc.
The B2C customers for Darwin Symphony Orchestra are the customers who seek their service for their own use and not for reselling or organizational performances. The biggest segment of B2C consumers of DSO are the people who attend their concerts held for fundraising. These are the opera enthusiasts who are interested in musical orchestra performances. The reason for the selection of this segment is that the fundraising gala event is the most popular and talked about event of the orchestra. This is the event held every year where the DSO repeats the most popular performances of the year and also makes available the official merchandise for purchase for their supporters. The audience or the segment that attends the concert are studied on the basis of their behavior, psychographic and profile variables (Wilson & Gilligan, 2009).
This segment of customers can be further classified and segmented based on their behavioral variables. The first segmentation can be done on the basis of their association with the DSO. They can be regular followers or a onetime attendee of the event being held. They have a common preference for opera and musical performances and they seek a great musical experience from the DSO. The psychographic traits that this segment demonstrates is the age group that varies between 16-25 and are mostly the students of CDU or are associated with the orchestra members in any way. They are generally students and the members of Darwin University. People outside of the university campus are also invited for the event, but even that comprises mostly of students and youngsters (Tuckwell, 2014). The DSO mostly promotes the event through in-campus drives and online promotion which is best suited for the tech friendly generation. B2C customers of DSO display the following characteristics – they attend the events for leisure and entertainment, they are only going to repeat the transaction a few times a year if they are satisfied with the service they get, the decision making process for them is simpler involving mostly one decision maker and the payments are straightforward (Dibb & Simkin, 1991). They are comparatively large in number, but lower in the amount of funds raised for the DSO. Therefore the marketing team of DSO must promote the events more on the platforms like social media, local radio stations, university campus and spread the word through pamphlets and posters of upcoming shows in the campus and the areas nearby.
Ways of Segmenting and Profiling Customers
The B2B niche customer for the marketing team of DSO to focus on would be the school programs that they conduct holding presentations and performances to engage and inspire the school students with knowledge of music. The DSO Music Education in School program has till date reached more than 2000 school students in their territory. This is their most successful program for B2B customers. This program is accessible to schools all over the northern territory and is the only one of its kind in that area. For the scholastic programs, the decision making unit is the managing body of the school. The decision making process will be lengthy and the management will put a lot of thought into starting a music education program in school. The students who are the consumers or end users of the program may also be involved and the management might take their opinion as well. Once the on boarding decision is taken for the DSO, this is going to be a prolonged association and most of the time will also lead to repeated transactions (Associates, 2010).
The B2B customers can also be called agents that trade the services. Thus the entire purchase process must be simple and straightforward for them. The B2B customers tend to purchase the services in large amount. They may set up a contract for a number of events or performances by DSO artists. The approval process is time taking and complex as it is purely a business transaction for a B2B buyer. These transactions have a high chance of getting repeated in future. The payment method is professional and based on the period for which the service of the orchestra is purchased. They also require a wide range of services as they can have varied customer types as opposed to B2C buyer who seeks a single service and are more rational in the decision making process. The B2B transactions thrive on personal relationships and they are mostly long-term buyers. The DSO marketing team must associate with more and more schools in Northern Australia to make the most out of this program. In addition to this, other B2B customers of the DSO are event organizers and institutions (Ganga, 2012). They must also focus on being a part of musical tours and programs to get visibility and promotion. Playing traditional Australian music will give them popularity in both rural and urban areas and their association with famous artist will also bring the orchestra in the lime light (Sahney, 2011).
The primary reason why any organization studies customer behavior is to predict the demand and the preferences of the customer in near future. This helps the businesses in preparing according to the forecasted behavior and be proactive in organizing the things. The study of customer needs can help the organizations in fulfilling them more effectively and efficiently (Burnett, 2012). It helps in strategizing and forming a more effective marketing plan. It also helps in making modifications in the currently followed marketing plan according to the changing preferences of the customer. The study of customer behavior helps the organizations in predicting the market trend, this gives them the time to prepare for and exploit the upcoming opportunities and for facing any upcoming threats or challenges (Durmaz, 2014). This not only makes the organization better equipped, but also gives them an advantage over their competitors. The positioning of an organization is how the people perceive it, particularly in relation to other competitive organizations in the market. Market positioning is the step followed by segmentation and targeting. At this stage, the organization selects the marketing mix that it finds most suitable for the target market and directs its marketing strategies on the basis of the same (Grimm & Malschinger, 2010). Positioning places the organization on a pedestal. It facilitates the image building of the organization on the minds of the target customers (Al-Jeraisy, 2008).
References
Al-Jeraisy, K., 2008. Consumer behaviour, Available at: https://d1.islamhouse.com/data/en/ih_books/single/en_Consumer_Behavior.pdf
Associates, W., 2010. Market Targeting and Prioritisation, Available at: https://wright-associates.com/WA/Resources/file/WA%20White%20Paper%20-%20Market%20Prioritisation.pdf
Burnett, J., 2012. The Concept of Positioning: The Future of the Marketplace, Available at: https://www.saylor.org/site/wp-content/uploads/2012/12/BUS203-2.1.3_Positioning.pdf
Dibb, S. & Simkin, L., 1991. Targeting, Segments and Positioning. International Journal of Retail & Distribution Management,, 19(3), pp. 4-10 .
Durmaz, Y., 2014. The Impact of Psychological Factors on Consumer Buying Behavior and an Empirical Application in Turkey. Asian Social Science, 10(6), pp. 1-11.
FTMS, 2012. Market segmentation, Available at: https://www.ftms.edu.my/images/Document/MKTG%200101%20-%20INTRODUCTION%20TO%20MARKETING/CHAPTER%206.pdf
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Larsen, N., 2010. Market Segmentation – – A framework for determining the right target customers, Available at: https://pure.au.dk/portal/files/11462/BA.pdf
Lynn, M., 2011. Segmenting and Targeting Your Market: Strategies and Limitations, Available at: https://scholarship.sha.cornell.edu/cgi/viewcontent.cgi?article=1238&context=articles
NRCDR, 2015. Overview of market segmentation, Available at: https://www.nrcdr.org/_assets/files/NRCRRFAP/resources/overview-of-market-segmentation.pdf
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Sahney, S., 2011. Consumer behaviour, Available at: https://nptel.ac.in/courses/110105029/pdf%20sahany/Module-1-1.pdf
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Walletzky, L., 2015. Market Segmentation, Targeting, and Positioning, Available at: https://is.muni.cz/el/1433/jaro2015/PV240/um/PA240_-_L3_-_Market_segmentation.pdf
Wind, Y. & Bell, D., 2007. Market segmentation, Available at: https://faculty.wharton.upenn.edu/wp-content/uploads/2012/04/0702_Market_Segmentation.pdf
Wilson, K. & Gilligan, C., 2009. Market Segmentation, Targeting and Positioning, Available at: https://ebooks.narotama.ac.id/files/Strategic%20Marketing%20Planning%20(2nd%20Edition)/Chapter%209%20%20%20%20Market%20Segmentation,%20Targeting%20and%20Positioning.pdf
Wood, M., 2013. About DSO – Darwin Symphony Orchestra. [Online]
Available at: https://dso.org.au/about/about-the-sdo/
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